Nafta Haggling Could Slide Into 2019 After Metals Tariffs

(Bloomberg) -- The window for a quick Nafta deal has probably closed and, barring a last-minute surprise, the process is set to stretch into 2019 and a new batch of lawmakers.

Recent high-level talks between the U.S., Canada and Mexico came up short in a bid to reach a deal that could pass Congress this year. Then came Thursday’s tariff announcement and war of words between the countries, particularly President Donald Trump and Canadian Prime Minister Justin Trudeau.

While Nafta negotiations will continue, the urgency looks to be gone. The recent phase of high-level, intense negotiations has now ended and talks will slow, two people familiar with negotiations said, speaking on condition of anonymity. Trump on Friday repeated his frequent criticism that Nafta has been a “terrible deal” for the U.S. and said he may favor signing bilateral agreements with Canada and Mexico.

“To be honest I wouldn’t mind seeing Nafta where you’d go by a different name, where you make a separate deal with Canada and a separate deal with Mexico,” Trump told reporters outside the White House. “These are two very different countries.”

And the legal window to pass a deal in this Congress, as the U.S. wanted, is rapidly closing, if not already closed. Larry Kudlow, director of Trump’s National Economic Council, said Friday that Nafta is “a story that is going to play out for a while.” It all suggests any Nafta deal would be handled by the next U.S. Congress and new Mexican president, pushing the process -- talks and subsequent ratification -- into 2019 without a sudden, rapid change of plans.

Any Nafta deal this year “will not be ratified by this U.S. Congress. The procedural and political calendars are now closed,” said Dan Ujczo, a Columbus-based trade lawyer with Dickinson-Wright. Reaching an agreement this year is also “unlikely,” he said. “There is a realization that President Trump’s Nafta is more likely to be passed by a new Congress with more Democrats and Trump Republicans than the current Congress.”

U.S. Deadlines

U.S. House Speaker Paul Ryan had said, citing timelines set out in U.S. trade law, that Congress needed notice of intent to sign a deal by May 17. He then said there might be a couple weeks of wiggle room, placing the deadline around now.

Ryan’s spokesperson, AshLee Strong, deferred to his public comments at a May 17 press conference when he said there’s “not an indefinite amount” of flexibility in Congress’s timeline, which means “time is really of the essence.”

The office of U.S. Trade Representative Robert Lighthizer didn’t immediately respond to a request for comment Friday on Nafta’s timeline.

Kudlow, speaking to reporters Friday, said Nafta “conversations are wide open” and that Trump wants reciprocity. Trump complained about Canadian agricultural policy in a tweet on Friday. “It will be solved,” Kudlow said.

Mexican elections are scheduled for July 1, with leftist Andres Manuel Lopez Obrador, known as “AMLO,” leading his nearest rival by more than 20 percentage points, according to Bloomberg’s poll tracker. His potential election -- and that of a new Mexican Senate and U.S. Congress -- could change the dynamic of talks and the type of deal that could have a chance of becoming law. No matter who wins, Mexico will have a new president on Dec. 1, since Enrique Pena Nieto isn’t eligible for re-election.

©2018 Bloomberg L.P.

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